D and E Ltd v A, B and C - [2022] NZCA 430

Date of Judgment

14 September 2022

Decision

D and E Ltd v A, B and C (PDF 468 KB)

Summary

Appeal allowed. 
Equity.
Fiduciary relationship. Trusts.
Family and Domestic Relationships. Parent and child. Family protection proceedings. 

The respondents brought a claim against the trustees of a trust that their deceased father settled. The father repeatedly raped the first respondent and physically abused the second and third respondents while they were children. After the respondents left home, they had no contact with their father until he died. The father did not leave the respondents anything in his will, and he gifted most of his assets to a trust to prevent the respondents from making a claim against those assets. The respondents claimed that their father's actions were a breach of fiduciary duty. The High Court held that (1) the relationship between parents and young children is inherently fiduciary, (2) the fiduciary relationship between the father and the respondents continued into the respondents' adulthood because his abuse left them vulnerable, (3) the father's fiduciary duties included providing for the respondents, (4) the father breached his fiduciary duties when he gifted his assets to the trust, (5) the trustees were liable for knowing receipt of the assets, and (6) the trustees held the assets on constructive trust for the father's estate, thereby exposing the assets to a claim under the Family Protection Act 1955. The trustees appealed against the finding of a fiduciary relationship and the imposition of a constructive trust. 

Whether there was a fiduciary relationship between the father and the respondents? 
Held: No.  Kós P agrees that the relationship between a parent and young child is inherently fiduciary. However,  Kós P finds that the fiduciary relationship between the father and the respondents did not continue into adulthood because there was no longer any relationship of trust. Gilbert J makes no comment on whether the relationship between a parent and young child is inherently fiduciary. Gilbert J finds that, if there was a fiduciary relationship between the father and the respondents, it did not continue into adulthood because the father held no power for the respondents' benefit and there was no duty of undivided loyalty. Collins J (dissenting) says that the fiduciary relationship between a parent and child can continue into adulthood in certain cases, such as when a parent undertakes to care for a disabled adult child. Collins J would have found that the fiduciary relationship between the father and the first respondent continued into adulthood because the father's abuse left her unable to live a normal and independent life. The father's fiduciary duty would have involved providing economic security to the first respondent, and this would have been breached when he gifted his assets to the trust. 

Whether a constructive trust should be imposed in favour of the father's estate? 
Held: No.  Kós P and Gilbert J found there was no breach of fiduciary duty when the father gifted his assets to the trust. They therefore held the respondents could have no proprietary claim to the assets. Collins J (dissenting) proceeded to consider the appropriate remedy if there had been a breach of fiduciary duty. Collins J says that knowing receipt is inappropriate because it is a personal claim and does not give rise to a constructive trust. However, the father's gift could be rescinded. This would allow the assets to be held on constructive trust for the father's estate where they could be contested in Family Protection Act proceedings.